Total second quarter revenue amounted to $8.7 million, compared with $11.8 million in the same period last fiscal year, reflecting, as expected, lower license sales during the transition to NetSol's next-generation financing and leasing solution, NFS Ascent TM.

License revenue for the fiscal 2014 second quarter was $456,000, versus $3.5 million in the same period last year. Maintenance revenue for the fiscal 2014 second quarter increased to $2.9 million from $2.7 million last year, reflecting the completion of certain projects. Service revenue remained consistent at $5.4 million, principally attributable to the first-generation NFS platform and additional service and change requests from customers. Service revenue in the second quarter of fiscal 2013 was $5.6 million.

"As we discussed in our outlook last quarter, results for the second fiscal quarter reflected the anticipated contraction in license revenue during the transition from our first-generation NFS product to the next-generation NFS Ascent platform, which we officially launched in the quarter," said Najeeb Ghauri, CEO. "The launch of NFS Ascent is progressing, particularly in North America and Europe where we have developed a strong new business pipeline with potential new customers and with current customers that we support in other regions throughout the world.

"As these negotiations progress, we are actively increasing our bench of talented employees, with more than 100 new employees going through various stages of training, so that we are ready to move quickly on additional new deals as they arise," added Ghauri.

Total operating expenses for the fiscal 2014 second quarter amounted to $4.3 million, versus $3.8 million in the fiscal 2013 second quarter. Operating expenses decreased from $4.9 million in the first quarter of fiscal 2014.

Operating loss for the second quarter of fiscal 2014 was $1.6 million, compared with operating income of $2.9 million last year.

Net loss was $1.6 million for the fiscal second quarter, equal to $0.18 per share, based on 9.1 million weighted average number of diluted shares outstanding. Net income for the same period last year was $2.2 million, or $0.28 per diluted share, based on 8.0 million weighted average number of diluted shares outstanding.

For the first half of fiscal 2014, total revenue was $17.8 million, versus $22.9 million for the first six months of fiscal 2013. Net loss for the fiscal 2014 year-to-date period was $2.7 million, or $0.30 per share, compared with net income of $3.2 million, or $0.40 per diluted share, last year.

At December 31, 2013, cash and cash equivalents increased to $11.6 million from $6.8 million at September 30, 2013, reflecting improved collections in the quarter. At June 30, 2013, cash and cash equivalents were $7.9 million. Cash provided by operations for the first six months of fiscal 2014 was $12.7 million, compared with $9.4 million for the first six months of fiscal 2013.

"We are well capitalized to manage our milestone product transition and further build the organization," concluded Ghauri. "With a robust backlog of services and maintenance revenue, and a growing new business pipeline for NFS Ascent, as well as expected additional contributions from our joint-ventures, we are optimistic about our long-term business prospects moving forward."

This press release may contain forward-looking statements relating to the development of the Company's products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "expects," "anticipates," variations of such words, and similar expressions, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Factors that could affect the Company's actual results include the progress and costs of the development of products and services and the timing of the market acceptance. The subject Companies expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

3,144,948

2,657,594

Provision for bad debts

259,306

54,889

Share of net loss (income) from investment under equity method

166,648

(484,487)

(Gain) loss on sale of assets

189,032

(14,021)

Stock issued for interest on notes payable

--

211,111

Stock issued for services

640,247

29,670

Fair market value of warrants and stock options granted

158,783

320,021

Amortization of financing costs

--

442,128

Changes in operating assets and liabilities:

Increase in accounts receivable

(2,089,498)

(2,378,873)

Decrease in revenue in excess of billing

8,612,283

514,720

Decrease in other current assets

367,741

1,217,728

Increase in accounts payable and accrued expenses

3,617,465

1,908,178

Net cash provided by operating activities

12,663,194

9,428,545

Cash flows from investing activities:

Purchases of property and equipment

(6,059,596)

(3,537,918)

Sales of property and equipment

78,678

59,350

Purchase of non-controlling interest in subsidiaries

(17,853)

(621,563)

Increase in intangible assets

(2,312,919)

(2,132,595)

Net cash used in investing activities

(8,311,690)

(6,232,726)

Cash flows from financing activities:

Proceeds from the exercise of stock options and warrants

560,500

612,650

Payment to common shareholders against fractional shares

--

(194)

Proceeds from exercise of subsidiary options

311,709

3,031

Restricted cash

(660,672)

(2,257,428)

Dividend paid by subsidiary to Non controlling interest

(266,343)

--

Proceeds from bank loans

1,276,505

2,049,698

Payments on capital lease obligations and loans - net

(781,756)

(723,936)

Net cash provided by (used in) financing activities

439,943

(316,179)

Effect of exchange rate changes in cash

(1,084,723)

(899,554)

Net increase in cash and cash equivalents

3,706,724

1,980,086

Cash and cash equivalents, beginning of the period

7,874,318

7,599,607

Cash and cash equivalents, end of period

$ 11,581,042

$ 9,579,693

NetSol Technologies, Inc. and Subsidiaries Reconciliation to GAAP

Three Months

Three Months

Six Months

Six Months

Ended

Ended

Ended

Ended

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Net Income (loss) before preferred dividend, per GAAP

$ (1,626,908)

$ 2,222,983

$ (2,724,023)

$ 3,152,108

Income Taxes

29,270

(2,548)

40,401

11,448

Depreciation and amortization

1,671,662

1,357,442

3,144,948

2,657,594

Interest expense

45,036

179,932

114,253

472,321

Interest (income)

(39,931)

(31,617)

(72,785)

(55,784)

EBITDA

$ 79,129

$ 3,726,192

$ 502,794

$ 6,237,687

Weighted Average number of shares outstanding

Basic

9,056,024

7,957,521

9,006,015

7,774,719

Diluted

9,089,846

7,968,598

9,039,838

7,785,796

Basic EBITDA

$ 0.01

$ 0.47

$ 0.06

$ 0.80

Diluted EBITDA

$ 0.01

$ 0.47

$ 0.06

$ 0.80

Although the net EBITDA income is a non-GAAP measure of performance, we are providing it because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. It should not be considered as an alternative to net income, operating income or any other financial measures calculated and presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. It may not be indicative of the Company's historical operating results nor is it intended to be predictive of potential future results.